The Louisiana Budget Crisis: FAQs

February 08, 2016

Louisiana faces the largest budget crisis in our state’s history – an estimated $940 million shortfall that must be addressed by June 30 and $2 billion shortfall for the next fiscal year that begins July 1.

To learn more about Louisiana’s budget crisis and how we got here, clickhere.

In order to address the budget deficits, Gov. Edwards issued the call for a special legislative session, which will begin on Saturday, February 14, 2016 and end no later than Wednesday, March 9, 2016. In anticipation of the special session, the governor has released a proposed plan to address the budget crisis that would protect higher education and health care from catastrophic cuts. You can read about Gov. Edwards' proposed plan to stabilize the budget here.

Below are some of the most frequently asked questions about Louisiana’s state budget:

What is one-time money?

One-time money are dollars the state cannot count on year-after-year to fund on-going state expenses. An example might be a lawsuit where the state gets a financial settlement. Another example might be the sale of state property. The best way to build a budget is to plan to fund expenses that come up year-after-year with revenues that the state can count on regularly coming in year-after-year.

What is recurring money?

Recurring money is the opposite of one-time money. It is money the state can count on coming in year-after-year, such as individual and corporate taxes, lottery proceeds and fees for services.

What is a statutory dedication?

A statutory dedication is nothing more than a dollar received by the state that the state Legislature has directed be spent on (or dedicated to) a certain purpose and not available for other state purposes. When the Legislature proposes and votes in favor of a statute – a law – that specifically spells out how to spend certain state general fund dollars, then those dollars are “statutorily dedicated.”

Because higher education and health care are the only two large areas of the budget expenditures with no constitutional or statutory protection from the budget axe. Two other large areas of expenditures have protection – K-12 education and transportation. The Louisiana Constitution requires funding of the formula through which the state distributes aid to public schools. Gasoline tax dollars are dedicated to roads and bridges. When there is a budget crisis and the governor and legislators have to go looking for ways to plug a budget hole, the only available departments where significant cuts can be made to try to shore up a broken budget are essentially, every time, our colleges and universities and our health care funding.

Why are we spending more money on Medicaid expansion when we can’t even fund our hospitals?

Medicaid expansion is going to help us stabilize our budget by bringing back federal dollars to make sure hospitals and doctors get paid to see patients. On the other hand, if we don’t do Medicaid expansion, our budget problems are actually going to get worse and services will likely have to be cut. That is going to hurt patients and hospitals. In the long-run, investing in preventive care through Medicaid expansion is also going to improve health outcomes and strengthen our workforce.

Are there state contracts that could be reduced or cut?

The Division of Administration is currently collecting and reviewing state agency funding of contracts for potential reductions. State contracts have an “out” clause or “non-appropriation” clause which give the ability for the state to cancel them for budgetary reasons. The DOA is reviewing how much state general fund each agency has requested spending on professional, consulting, legal and other contracts. If there are insufficient state general fund dollars, one option is for the governor to propose cuts in contract dollars requested by an agency which would leave it to the agency to determine which contracts to cancel or reduce.

What are corporate tax exemptions, incentives, credits and giveaways?

Corporate tax exemptions, incentives, credits and giveaways are the items listed in Louisiana’s Tax Exemption Budget under Income tax, Corporation Franchise tax and Tax Incentives and Exemption Contracts. The term “exemption” is used to describe all exemptions, exclusions, deductions, credits, rebates, preferential tax treatments, and tax deferrals. Tax exemptions are tax dollars that are not collected and result in a loss of state tax revenues available for appropriation. In this sense, the fiscal effect of tax exemptions is the same as the state directly spending its funds.

What corporate tax exemptions does the state currently have, and how much does that cost the state each year?

The new Tax Exemption budget is expected to be published later in February. For Fiscal Year 2013-2014, Corporation Income tax exemptions cost the state $1.96 billion and Corporation Franchise tax exemptions cost the state $19 million. This amount includes the revenue losses reported under Tax Incentive and Exemption Contracts in the Tax Exemption Budget that reduced Corporation Income and Franchise taxes.